Asian markets slide as investors dump AI winners, KOSPI suffers sharpest blow – Firstpost

Asian stock markets tumbled on Monday as investors rushed to lock in profits from technology shares that had powered a months-long artificial intelligence (AI) rally, while escalating tensions in West Asia added to concerns about inflation and global economic growth.

South Korea’s benchmark KOSPI bore the brunt of the selloff, plunging more than 8 per cent at one stage and
triggering a 20-minute trading halt. The index, which had surged to record highs last week on optimism surrounding AI-linked chipmakers, is now down more than 15 per cent from its recent peak.

The sharp decline followed a bruising session on Wall Street on Friday, when the Nasdaq Composite slumped 4.2 per cent — its biggest one-day fall since April last year — as investors reassessed lofty valuations in AI-related stocks and priced in the possibility of higher US interest rates for longer.

Korean chipmakers lead the rout

South Korea’s stock market, heavily weighted towards semiconductor companies, suffered the steepest losses in the region. Shares of Samsung Electronics and SK Hynix, two of the world’s largest memory chipmakers and major beneficiaries of the AI boom, fell more than 10 per cent each.

The Korea Exchange convened an emergency meeting to discuss measures to stabilise markets amid heightened volatility. Foreign investors sold a net $10 billion worth of Korean equities last week, intensifying pressure on the Korean won, which fell to its weakest level against the US dollar since 2009.

The South Korean government on Sunday announced measures aimed at supporting the currency and pledged action against speculative trading.

Japan also hit as tech stocks retreat

Japan’s Nikkei 225 fell more than 3 per cent in early trading, while the broader Topix index lost around 2.5 per cent. Both benchmarks had reached record highs only days earlier, fuelled by strong foreign inflows into technology and semiconductor-related stocks.

Among the biggest decliners were electronics component maker TDK and memory-chip producer Kioxia, whose shares have surged this year on expectations of rising AI-related demand. SoftBank Group, which recently overtook Toyota Motor in market capitalisation, fell nearly 8 per cent, surrendering its position as Japan’s most valuable listed company.

Fed fears and valuation concerns

Investor sentiment was further rattled after stronger-than-expected US jobs data raised expectations that the Federal Reserve may keep interest rates elevated or even tighten policy further to combat inflation.

US two-year Treasury yields climbed sharply following the jobs report, increasing pressure on high-growth technology stocks whose valuations are particularly sensitive to interest-rate expectations.

Analysts said concerns are also emerging over whether the extraordinary gains in AI-linked companies have outpaced earnings prospects.

West Asia tensions lift oil prices

Adding to market unease, crude oil prices surged after Israel launched strikes on Beirut, prompting retaliatory missile attacks by Iran against Israeli targets.

Brent crude futures rose
about 2.6 per cent to around $95 a barrel in early Asian trade. Higher oil prices threaten to complicate the inflation outlook for major economies and could further constrain central banks’ ability to cut interest rates.

The geopolitical developments came despite OPEC+ agreeing on a fourth consecutive increase in oil production targets, underscoring concerns that supply disruptions could outweigh additional output.

Focus shifts to inflation and central banks

Investors are now awaiting key US consumer inflation data due later this week, along with monetary policy decisions from the European Central Bank and the Bank of Canada.

The market is also preparing for a series of high-profile technology listings, including the much-anticipated SpaceX initial public offering, which analysts say could draw liquidity away from existing equities.

Cryptocurrency markets also remained under pressure, with Bitcoin hovering below $63,000 after suffering its steepest weekly decline since the collapse of the FTX exchange in 2022.